AMD Astonishes

Updated from 6:34 p.m. EDT

Advanced Micro Devices(AMD), the world's second-largest chipmaker, handily beat third-quarter estimates Tuesday.

Strong microprocessor sales helped to boost revenue 23% and earnings nearly 73%.

For the quarter ended Sept. 25, AMD earned $76 million, or 18 cents a share, on sales of $1.52 billion. During the same quarter last year, AMD earned $44 million, or 12 cents a share, on sales of $1.24 billion.

Analysts had expected earnings of 8 cents a share on sales of $1.38 billion, according to Thomson First Call. AMD had said it expected computer-chip sales to "exceed normal seasonal patterns" in the third quarter, but declined to project memory unit results.

"It's clear evidence that this is a much different company than it was two to three years ago," said Sangeeth Peruri, semiconductor analyst for Seligman Technology Group, a division of J & W Seligman & Co., which holds AMD shares. "If [the company] continues to grow at these levels, the leverage is huge in the model."

Still, it's possible the margins should have been even higher, Peruri said. One factor that could have weighed on them was $66 million in bonuses that AMD paid out during the quarter, up dramatically from $16 million in the previous quarter and $17 million in the same period a year ago.

"I think with the revenue number they came up with, it's possible people were hoping for a larger EPS," Peruri said.

AMD's gross margin was 41%, up from 39% in the previous quarter and above 40% in the third quarter last year. The company has long-term targets of 60% margins, but that takes into consideration the memory group's spinoff.

The Sunnyvale, Calif.-based company recorded an operating profit of $79 million compared with $68 million a year ago and an operating loss of $7 million in the previous quarter.